Nearly a sixth of British businesses are in financial trouble, amid concerns the UK could suffer a wide-ranging economic slowdown in the coming months, according to research.
A report by a leading insolvency firm has revealed there are 484,000 UK firms in “significant financial distress”, amounting to 14 per cent of economically active companies.
Begbies Traynor’s Red Flag Alert data for the first quarter of 2019 showed the number of financially distressed firms had risen two per cent year-on-year from 457,000 this year. Meanwhile, the number of businesses in “critical distress” during the same period – often a precursor to formal insolvency – rose by 17 per cent.
Most troubled is the property sector, said the report, which saw a 13 per cent year-on-year increase in the number of companies in significant financial distress rising to 48,000.
Construction, often considered the bellweather of the UK economy, has also suffered. Compared to the same quarter last year there are now 10 per cent more companies involved in the development of building projects in significant financial distress, a total of 13,018.
Construction accounts for 17 per cent of all UK businesses, employs almost 2.5m people and contributes 6 per cent of the UK economic output, making this “bad news for the UK economy,” according to Begbies Traynor partner Julie Palmer.
She said: “Many UK businesses are currently in limbo and deferring major investment decisions. This combined with consumers holding back on big ticket purchases has resulted in increasing significant distress across many sectors.
“Capital intensive sectors – such as construction and property – are suffering as both business and consumers have taken a cautious approach and limited their exposure.”
Begbies Traynor executive chairman Ric Traynor added that although Brexit was a major driver of the downturn, “the combination of faltering European economies and a potential trade war between the US and Europe could have a far wider impact on UK businesses than our domestic issues”.